Centre reworking Chabahar deal as US sanctions loom

The looming US sanctions on Iran has put the deal for Chabahar port between India and Iran on the fast-track. The two countries are working on amending the clause that mandates activation of the deal after receiving funding from India.

Under the May 2016 pact, India was to pay Rs 900 crore ($150 million) to Iran after receiving an application from the latter, after which the project can be handed over for 10-year operations. The payment is to be made within three months of receiving the application.

However, Iran had alleged that India was delaying the development process, while Indian authorities responded that Iran never submitted the application for payment on time and kept changing its decisions.

Now, an application for payment of euro 13 million ($18 million) from Iran is under consideration.

But Iran's insistence on payment being made in euros have made things more difficult for India, sources said.

According to the sources, a high level Iranian delegation visited India on last Wednesday to discuss issues related to Chabahar port.

"A few amendments are likely to be made soon before things can move to signing of the main contract," a senior government official aware of the development said.

An agreement for the start of interim operations was signed on May 6, 2018. However, two days later, the US announced its decision to re-sanction Iran, which slowed the whole process as India is not able to provide a bank guarantee for the project.

"So even the interim operation is in a slight problem. We should have started the operations by June. Everything is ready, but not being able to provide bank guarantee is a problem. So certain amendments are being made even is this regard, following which we can hope to start interim operations by November" a senior official said.

When contacted, A K Gupta, managing director, India Port Global Ltd (IPGL), confirmed the development of de-linking the payment and project activation, though refusing to comment further. IPGL, a 60:40 joint venture between Jawaharlal Nehru Port Trust and Deendayal Port Trust (previously Kandla Port Trust), was set up by the government to make strategic investments in ports overseas.

IPGL and Aria Banader Iranian Port (ABIA) signed a deal in May 2016 to equip and operate the container and multi-purpose terminals at Shahid Beheshti — Chabahar Port Phase-I with capital investment of $85.21 million and annual revenue expenditure of $22.95 million on a 10-year lease. The Chabahar port project will be the first overseas venture for the Indian state-owned ports.

Located in the Sistan-Baluchistan Province on Iran's southeastern coast (outside Persian Gulf), Chabahar port is of great strategic importance for the development of regional maritime transit traffic to Afghanistan and Central Asia. An email seeking response from ABIA did not elicit any response till the time of going to press.

The officials said they are keeping an eye on the government level talks going on with US, seeking exemption for the development for Chabahar port. However, they claim that some alternative will be worked out even if exemption does not come for the project. The sanctions will also have some impact on the revenue generation from Chabahar port, though the transit traffic is not likely to get affected much, the official said.

The looming sanctions, is already having the effect on the project as IPGL, which has ordered several equipment, including 14 rubber-tyred gantry cranes for about $18 million from Finnish crane-maker Cargotec OYJ for use at the Chabahar port as facing payment issue. IPGL had earlier signed a $29.8 million deal with Chinese port-crane maker Shanghai Zhenhua Heavy Industries Co Ltd for four rail mounted quay cranes.

BRIDGING THE GULF$150 million – India was to pay to Iran after receiving an application from Iran $18 million – Application from Iran is being considered by India.